Growth Through Global Expansion

AGY – Acquisition of AGY-Shanghai

Situation

AGY has had a strong business in Asia, but until late 2008, did not have a single Asian employee. Increasingly, applications served by AGY’s products were migrating to low-cost countries in Asia and Asian yarn products were penetrating US and EU applications as costs which AGY could not match from its US manufacturing base.

Approach

Jeff led a project to assess potential partners in Asia for co-investment. After narrowing down the field to a short list of 3 candidates (2 in China, 1 in Taiwan), discussions began in earnest with Grace THW Group, an integrated electronics supplier founded by Dr Winston Wong which had a yarn manufacturing plant in Shanghai. An extended 18 month negotiation period took place in a very difficult economic environment, which made valuation gaps difficult to bridge. Jeff quickly earned the trust of GTHW and was the lead negotiator through this whole process.

Results

AGY closed on the acquisition of 70% ownership of this business on June 10, 2009. The business is structured as a JV, with AGY having full control and the option and full intent to purchase the remaining 30% interest sometime in the near future. AGY has begun transferring it’s leading edge fine yarns technology to the new facilitity and expects it to be the industry’s leading fine yarn facility in the world shortly.

Jeff and Dr. Winston Wong At The JV Signing Ceremony

GE Quartz — Construction of Wuxi Plant

Situation

GE Quartz was increasingly facing competition at the lower end of it’s product line from lower cost competitors who were emerging in China. Chinese producers were selling tubing (primarily for optics and lamp applications) at prices which were below GE’s US or German production base variable cost.

Approach

Jeff determined that a production base in China was essential to defend and maintain this business. Potential partners were assessed, including GE’s largest emerging competitor in China. JV discussions with the leading candidate proceeded to an advanced stage, but late breaking due diligence findings caused termination of these discussions. Jeff then encouraged the business to consider a greenfield. Jeff led analysis of the price elasticity of various market segments an d the additional market share which could be recovered via a significantly lower cost base. This analysis was used to support the greater than $35MM greenfield capital investment.

Results

Jeff and team gained support for the project and site selection and construction ensued. The Wuxi plant was commissioned in Spring of 2005 and quickly became one of the highest quality low cost quartz tubing factories in the world. GE was able to use this platform to recover over $20MM of share and over time the product range of the facility was expanded to include semiconductor tubing and photovoltaic crucibles.